1
Q
Indebtedness
A
Refers to the state of being indebted to another party for an amount of money borrowed.
2
Q
Good Debt
A
- Money borrowed to purchase an appreciating asset.
- Helps generate income and increase net worth.
- Often there are tax incentives for good debt investments.
3
Q
Bad Debt
A
- Money borrowed to purchase a depreciating asset
- Limits what can be done with money as interest payments and fees drain away savings.
4
Q
Grey Areas of Debt
A
e.g debt consolidation loans, borrowing to invest/margin loans, using points like frequent flyers.
5
Q
Personal Loan
A
Smaller loan than a mortgage, and is usually used to finance a car or make home renovations.
1-5 year duration as opposed to 30 years for mortgages.
6
Q
What are sources of personal loans?
A
- Banks (provide a wide range of financial services to various sectors, including (through subsidiaries) funds managements and insurance services)
- Credit Unions (mutually owned institutions such as teacher credit union)
- Financiers (provide loans to households and small-medium (SME) businesses)
7
Q
Subsidiary
A
A company that belongs to another company, usually referred to as the parent company or holding company.
